Sale of Business and Employees

Transfer of Undertakings & Protection of Employees Regulations 2003

A transfer of undertakings occurs when a business or part of a business is taken over by another employer as a result of a merger or transfer/sale. The question is often asked what are the issues concerning the sale of business and employees.

When a transfer takes place there is a legal obligation on the new employer to take on the existing staff of the business or the part of the business concerned. The employee’s accrued service with his or her original employer is deemed to have been with the new employer. The employee is entitled to terms and conditions of employment with the new employer which are no less favourable than those he or she enjoyed with the previous employer immediately prior to the transfer.

These Regulations apply to public and private undertakings engaged in economic activities whether or not they are operated for gain.

Transfer means the transfer of an economic entity (company or business) which retains its identity.

Economic entity means an organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is for profit or whether it is central or ancillary to another economic or administrative entity.

In general, the Regulations apply to any person:

  • Working under a contract of employment, including apprenticeship
  • Employed through an employment agency or
  • Holding office under, or in the service of, the State (including a civil servant within the meaning of the Civil Service Regulation Act, 1956),
  • An officer or servant of a harbour authority, health board or vocational education committee, and
  • A member of the Garda Siochana or of the Defense Forces.

In the case of agency workers, the party who is liable to pay the wages (employment agency or client company) is the employer for the purposes of these Regulations.

The contractual rights of the employees do not, however, transfer where the original employer is subject to proceedings whereby he may be adjudicated bankrupt, or wound up for reasons of insolvency, by order of the High Court (unless the sole or main reason for the institution of bankruptcy or insolvency proceedings is the evasion of an employer’s legal obligations under the Regulations).

All the rights and obligations of an employer under a contract of employment existing on the date of transfer, are transferred to the new employer on the transfer of the business or part thereof. The new employer must continue to observe the terms and conditions of the collective agreement until it expires or is replaced.

We review and advise agreements, indemnities, policies and procedures for transferring employees on business sale and purchase.

Contact:

Caoimhe Connolly
Caoimhe Connolly
Email: cconnolly@moranryan.com